Mortgage rates increased for a third consecutive week, pushing averages closer to 7% and adding pressure to buyers.
Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 6.96%, up from 6.90%. A year ago at this time, the 30-year FRM averaged 5.22%.
The 15-year fixed-rate mortgage also increased, up to 6.34% from 6.25%. A year ago, it averaged 4.59%.
“There is no doubt continued high rates will prolong affordability challenges longer than expected, particularly with home prices on the rise again,” said Sam Khater, Freddie Mac’s Chief Economist.“However, upward pressure on rates is the product of a resilient economy with low unemployment and strong wage growth, which historically has kept purchase demand solid.”
Demand has been sluggish since rates began rising but still rebounded faster than inventory, resulting in a reversal of price declines. The housing market officially recovered from its $3 trillion loss when its total value hit a record high of $47 trillion in June.
Zillow predicts the market will soon cool again as summer shoppers return to the sidelines.
“The housing market is returning to normal seasonal patterns, and that’s a positive sign for buyers who faced stiff competition this spring,” said Zillow senior economist Nicole Bachaud.
Buyers will still face affordability challenges presented by stock shortages, she said, but should have a bit more breathing room.
How buyers will react to a fall slowdown is yet to be seen, however. Consumers are overwhelmingly pessimistic about the housing market even as they gain confidence in their personal finances.
Respondents to a Fannie Mae survey cited high home prices and mortgage rates as the reason for their outlook, and largely believe affordability is going to get worse. The net share of people who expect home prices to increase in the next year rose by 6% month-over-month and has been on the rise since March.
“[W]e have not seen much movement in the ‘good time to sell’ component over the last few months, an indication that the current low levels of existing homes for sale will likely continue to persist in the near term, as also reflected in our latest forecast,” Doug Duncan, Fannie Mae Senior Vice President and Chief Economist, said.
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